The Union power ministry has moved a proposal to grant Power Finance Corporation (PFC) the status of a development financial institution (DFI).
- The ministry of power is learnt to have sought the DFI status for PFC under the National Bank for Financing Infrastructure and Development (NaBFID) Act, 2021.
What are development financial institutions (DFIs)?
- The objective behind the move is to enable PFC to steer global climate funding and net zero investment in the country.
- With this, PFC would be the first DFI for climate and energy transition in India, if the proposal is taken to its logical conclusion.
- The move would address the concern raised by several multilateral, development and sovereign financing agencies about the lack of a nodal agency for steering climate loans and aid in the country.
- The DFI status helps a financial institution (FI) access foreign funding, grants and loans easily and in higher quantum, as compared to a public financial institution (PFI), which PFC already is.
- DFIs are usually majority-owned by national governments and source their capital from national or international development funds or benefit from government guarantees.
- This ensures their creditworthiness, which enables them to raise large amounts of money on international capital markets and provide financing on very competitive terms.
(Source: BS)
